GLOBAL MARKETS-Stocks poised for biggest drop in two weeks on U.S. and China concerns

LONDON, Nov 9 (Reuters) - Global stocks were heading for their biggest drop in two weeks and emerging market currencies also slipped on Friday as a confident U.S. central bank and weak Chinese data hit demand for risky assets.

MSCI’s gauge of stocks across the globe fell half a percent, its biggest drop since Oct. 26, as the U.S. Federal Reserve held interest rates as expected but indicated that another rate increase is likely in December.

While the decision to hold rates was anticipated by markets, some participants had expected a more cautious approach from the central bank after a stock market rout in October.

But the Fed indicated a December increase is a distinct possibility in a robust economy. That contrasts sharply with China, where cooling producer price inflation and falling car sales suggested an economy struggling to gain traction.

“Worries about trade wars and how the slowdown in China will impact the rest of the world mean stocks appear to be more risky, so there’s a typical risk-off move in markets today,” said DZ Bank rates strategist Pascal Segesser.

Stocks in Hong Kong and China were the main losers in Asia, where a financial sector sub-index fell more than 2 percent after China’s banking watchdog told lenders to allocate at least a third of new loans to private companies, raising the prospects of a jump in bad assets.

European stocks followed Asia lower, with main indexes opening in the red, though a batch of company earnings and UK GDP data might offer some support later in the session.

MSCI’s main European index was down nearly 1 percent and the broader Euro STOXX 600 fell 0.7 percent.

A confident Fed also gave a boost to the dollar, which had weakened sharply after mid-term elections this week raised the prospects of U.S. political gridlock. The greenback gained a quarter of a percent against the euro and half a percent against the British pound.

The dollar index measuring the currency against its six major rivals gained 0.25 percent to 96.86.

Losses in equities pressured bond yields lower, with safe-haven benchmark debt in Germany and the United States softening across the board, pressured by world trade frictions and a budget standoff between Italy and Brussels.

Oil prices fell to multi-month lows as global supply increased and investors worried about the impact on fuel demand from of lower economic growth and trade disputes.

Benchmark Brent crude oil fell to its lowest since early April, down more than 18 percent since reaching four-year highs at the beginning of October.

The sturdy dollar tarnished the appetite for safe-haven gold , with the price down 0.2 percent at $1221.42 an ounce.

Still, market watchers said appetite for equities is likely to remain firm unless there is a big sell-off in credit markets or a spike in volatility.

An ETF tracking the performance of high-yield debt consolidated near three-week highs while gauges of volatility edged lower after a spike earlier this week.

“As long as these two indicators are not flashing red, stock markets should remain supported,” said Marc Ostwald, a global strategist at ADM Investor Services in London.

For the Reuters Live Markets blog on European and UK stock markets open a news window on Reuters Eikon by pressing F9 and type ‘Live Markets’ in the search bar. (Reporting by Saikat Chatterjee Additional reporting by Dhara Ranasinghe Editing by David Goodman)